Correlation Between VanEck Preferred and Principal Spectrum

Can any of the company-specific risk be diversified away by investing in both VanEck Preferred and Principal Spectrum at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining VanEck Preferred and Principal Spectrum into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between VanEck Preferred Securities and Principal Spectrum Preferred, you can compare the effects of market volatilities on VanEck Preferred and Principal Spectrum and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in VanEck Preferred with a short position of Principal Spectrum. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Preferred and Principal Spectrum.

Diversification Opportunities for VanEck Preferred and Principal Spectrum

-0.22

Correlation Coefficient

VanEck Preferred  Principal Spectrum

Very good diversification

The 3 months correlation between VanEck and Principal is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Preferred Securities and Principal Spectrum Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Principal Spectrum and VanEck Preferred is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on VanEck Preferred Securities are associated (or correlated) with Principal Spectrum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Principal Spectrum has no effect on the direction of VanEck Preferred i.e., VanEck Preferred and Principal Spectrum go up and down completely randomly.

Pair Corralation between VanEck Preferred and Principal Spectrum

Given the investment horizon of 90 days VanEck Preferred Securities is expected to under-perform the Principal Spectrum. In addition to that, VanEck Preferred is 2.58 times more volatile than Principal Spectrum Preferred. It trades about -0.04 of its total potential returns per unit of risk. Principal Spectrum Preferred is currently generating about 0.11 per unit of volatility. If you would invest  1,846  in Principal Spectrum Preferred on December 29, 2024 and sell it today you would earn a total of  27.00  from holding Principal Spectrum Preferred or generate 1.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

VanEck Preferred Securities  vs.  Principal Spectrum Preferred

VanEck Preferred Sec

Risk-Adjusted Performance

Very Weak

Over the last 90 days VanEck Preferred Securities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, VanEck Preferred is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Principal Spectrum

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Principal Spectrum Preferred are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Principal Spectrum is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with VanEck Preferred and Principal Spectrum

The main advantage of trading using opposite VanEck Preferred and Principal Spectrum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck Preferred position performs unexpectedly, Principal Spectrum can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Principal Spectrum will offset losses from the drop in Principal Spectrum's long position.

The idea behind VanEck Preferred Securities and Principal Spectrum Preferred pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.